Joel Kotkin: America’s Glass Half-Empty or Half-Full?

The stock market is high, real estate prices have resurged, even the unemployment rate is dropping, yet Americans still feel pretty down about the future. A survey released in January by the AP-NORC Center for Public Affairs Research had 54 percent of respondents expecting American life to go downhill over the coming decades. In a December survey, 23 percent of respondents said things will improve over time.

Yet, in reality, there are several huge trends – economic, environmental, demographic – working in favor of the United States. Despite 13 straight years of underwhelming leadership, the U.S. can emerge extraordinarily blessed from the Great Recession and lackluster recovery, if Americans take advantage of our current situation.

notes one former federal level official, windfall for the largest Wall Street firms. Executives at these same firms set new compensation records in 2011, just three years after the financial “wizards” left the world economy on the brink of economic catastrophe.

As people on Wall Street, and their hipper counterparts in Silicon Valley, celebrate their good fortune, most people are not doing well, and they know it. Unemployment may have dropped officially, but the percentage of Americans in the workforce is now at the lowest level since December 1977. Huge parts of our society now face long-term unemployment or, at best, a marginal existence at the low end of the job market.

This trend is most disturbing because it has been going on for a long time and, generally, has been getting worse. Since 1973, for example, the rate of growth of the “typical family’s income” in the United States has slowed dramatically; for males, it has actually gone backward when adjusted for inflation, at least until the early 1980s. In contrast, in 2012, the top 1 percent of earners accounted for one-quarter of all American income, the highest percentage in the past century.

So, given these problems, why should anyone be optimistic? After all, by 2020, the CIA suggested in 2005, the U.S. world position will have eroded because of the rise, most notably, of India and China; many business leaders share this assessment.

Nevertheless, here are five reasons for optimism.

Everyone else is in worse shape

Looking for a global hot spot that’s doing better? Look again. Virtually all America’s much-vaunted competitors of yesterday – notably, Japan and the European Union – have suffered slow economic and demographic growth. The much-ballyhooed winner of tomorrow, China, also appears to be slowing. Political corruption, soaring local debt and massive levels of pollution are creating a crisis of confidence, reflected by the growing exodus of the educated and affluent from China and Hong Kong, with many ending up in the United States.

Barack Obama has tried to take credit for America’s huge shift toward self-sufficiency in oil and gas, a movement driven largely by wildcatters and independents. Of course, it would have never happened if he had his druthers; under his administration, energy production on federal lands has dropped steadily. Nevertheless, the president seems smart enough not to shut off this amazing development on private and state lands, despite incessant pressure from his environmentalist supporters.

The energy revolution, notably in natural gas, changes everything. It allows us to tell many of the world’s leading malefactors – Russia, Venezuela, Iran and Saudi Arabia – to keep their oil. It also is driving continued improvement in air quality and reduced levels of greenhouse gases. American natural gas, rapidly replacing coal as an energy source, has turned this country into what one green think tank, the Breakthrough Institute, called “the global climate leader.” We are lowering our emissions far more rapidly than are the Europeans, people widely praised by some U.S. greens for having superior policies.

Critically, the vast supplies of oil and, most importantly, natural gas, are pushing down manufacturing costs well below those imposed on Asian and European firms. This is where industrial jobs have been growing the fastest, and are likely to expand in years ahead. In fact, U.S. industrial and energy production has driven U.S. exports to a record level, one clear sign that the nation’s competitiveness is beginning to move beyond our traditional strengths in entertainment, services and agriculture.

Demographic advantages

As in other countries, the U.S. birth rate fell during the recession, but this decline has now stopped as the economy has crawled back. Over the past decade, the U.S., through somewhat high birth rates and immigration, has avoided the kind of demographic implosions that afflict most of our key competitors. In the next few decades, the working population of Americans is expected to grow substantially, while those in Japan, Korea, Europe and China all taper off.

America’s relative youth helps not only fiscally – with more young people to carry the burden of a swelling retiree population – but also culturally. Despite the rise of entertainment and media in other countries (for example, Bollywood films or Korean pop music), the domination of new culture remains overwhelmingly American. Critically, this applies not only to Hollywood but even more so to digital media, where U.S. domination is both overwhelming and terrifying our competitors, particularly the autocrats in Moscow and Beijing.

Blessings of federalism

Perhaps America’s greatest strength lies in its constitutional order. Unlike other countries, the U.S. was defined by a separation of powers that accommodates regional differences. The calls from Washington by both Left and Right for more national solutions is misplaced; whether used to promote conservative or liberal policies, one size does not fit nearly all in a country as diverse and differentiated as the United States.

Instead, we need to let our states and regions seek out the approaches that work best for them. If Ohio and Pennsylvania allow fracking, and it creates significantly better results than those in anti-fossil-fuel states like New York and California, that would send a message to other states, but does not have to reflect a national policy.

America’s regions have enormous assets and advantages in the global economy. If we allow them to exploit what they have, there may be more hope for the future than many now believe.

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The Georgia Public Policy Foundation is something that I am proud to be a part of today. The research conducted by education groups like yours is invaluable in helping form opinions and allowing people to reach conclusions that ultimately help them make the right decisions.